Definitely a must-watch video for clients!
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Week of October 5, 2026
Dear Clients, here's another (this one's short) video we'd like you to be sure and take in.
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Per yesterday's video, September was the first truly ugly month for markets since March... But now we enter a period that, even during past mid-term election years, tends to be a very good stretch for asset prices.
Of course this year's setup has more to contend with than simply domestic politicking!
For the moment, save for a yet-unconfirmed attack on an Aramco oil facility, the latest (weekend) news flow has been notably tame, relatively-speaking.
As I've pointed out, the US administration is in the eleventh hour if it intends to pull a few market levers to catch a wealth-effect edge heading into election day.
Scott Bessent taking the treasury bond buyback to its stated upside limit last week, plus Europe's giving the nod to the US's request to unleash a meaningful amount of diesel (in particular) reserves suggests that they've yet to give up on juicing market forces to perhaps sway the on-the-fence voter come early November.
Gold has been interesting to track of late... It's a not-small position for us that, since we added it, has been very profitable to own -- until this year, that is, and certainly until the past month or so.
GLD YTD:
Per Sunday's video, there's notable turbulence occurring just below the equity market surface.
Along with the concerning breadth readings we covered, as I type nearly 2/3rds of S&P 500 constituents are experiencing a technical bear market (down 20%+ from previous highs)... I.e., stocks -- save for the tech sector -- are struggling mightily as we enter Q4.
So what's going on?
Well, as I illustrated in my 9/23 chart pack, oil is largely running the show.
Here's Bloomberg:
"Global Equity Weakness — Late September into October 2026
The Common Thread: Oil Amplifying a Bond Market Rout
Two forces are working in tandem to pressure equities globally: a relentless rise in sovereign bond yields and an oil price that is flirting with $100/bbl. Brent crude is up ~2.5% today to around $100.49, having risen for a third consecutive month, driven by Middle East supply disruptions tied to the US-Iran conflict. Critically, oil is not just a cost headache — it is actively feeding the bond selloff by stoking inflation fears, which in turn pushes yields higher and compresses equity valuations. US 10-year Treasury yields have touched their highest since 2002 at ~5.30%, while 30-year Gilt yields have surged to 6% for the first time since 1998."
As for this morning specifically:
"US: Oil Erasing the AI Rally
The dynamic in US equities is stark. S&P 500 futures wiped out an advance of as much as 0.7% — driven by an upbeat Micron forecast — as the renewed oil climb deepened the bond selloff. (1) ISM manufacturing data this morning showed a gauge of raw-material prices jumping to its highest since May, amplifying inflation anxiety and sending the S&P 500 on track for its worst week since August. (2) A gauge of big banks lost 2%. (3) Beneath the surface, the equal-weighted S&P 500 is eyeing its seventh consecutive weekly loss — a streak seen only twice before in history — even as AI-linked megacaps hold up. (4) Oil is a key reason for the divergence: energy costs squeeze the broad market while tech remains relatively insulated."
I'll have lots to share on the topic over the weekend.
Just thought I'd pop in with a quick note, given the pain markets are feeling pretty much across the board this morning.
I say "pretty much" because of course anything tied to the culprit of late is catching a bid... I.e., oil-related stocks, in the aggregate, are up 2/3rds of a percent, while the likes of industrials, materials, tech, communication, financials and utilities are all seeing drawdowns of between 1 and 1.5% as I type.
Long-term bonds (which we do not own, but are a tell on conditions) are getting hammered this morning as well... As are precious metals (which we do own) to the tune of minus 4-5%.
This is a stark reversal of the rallies we experienced on Friday, which essentially tells you all you need to know for now.
That is, on Friday there were high hopes of a near-term respite that would open the straight of Hormuz... While today, those hopes have -- for the moment -- been dashed.
Make no mistake, the US/Iran affair is something that cannot persist indefinitely, at least to the extent that it chokes oil supply sufficient to -- for one example -- keep gasoline prices double what they were to start the year... And of course this is all doing a major number on the Iranian economy.
I.e., an oil-emphasized resolution is in the offing, but the market is pleading for it sooner than later.
We'll keep you posted on these short-term developments (lots of it noise), while prudently and painstakingly keeping our focus on the structural dynamics that when properly understood -- short-term volatility notwithstanding -- make for long-term investment success.
PS: Dear clients, if the recent volatility -- or, say, the latest news headlines -- are at all getting under your skin, and our next review meeting is farther out than you'd like, don't hesitate to drop me an email, there's always room to schedule a call.
"As for the Iran situation, while both sides have engaged in negotiations over the past week, and during the UN session, their respective speeches at said session did anything but assure markets that a deal is close at hand... Although that -- in terms of agreeing to at least a short-term respite -- can change in a heartbeat, as we've experienced."
Headlines a few minutes ago:
Per yesterday's message herein, the very recent action in markets has been virtually across-the-board risk-off... Although, while this morning we're once again seeing weakness in the major global equity averages, in commodities (including precious metals), and bigly in bonds, our US healthcare, communications and of course energy (as oil continues its ascent) are offsetting a bit of the pain so far this morning.
Suffice to say, September is thus far fulfilling its historical role as the worst month of the year for markets, reflected in the broader equity averages (such as the S&P 500 equal weight) in particular.
Rough day for markets today, pretty much across the board... I.e., your most diversified portfolio took an outsized one-day hit as everything from global equities, to bonds, to precious metals got escorted to the woodshed:
Clients and regular readers will note that as recently as, say, a month (or less) ago, I was firmly of the mind that the Fed would not hike rates anytime soon... A view that markets demanded that I reconsider just ahead of this week's Fed meeting.
Here's from my commentary on Tuesday, where I referenced my commentary from the previous Friday:
From last Friday's note:
"...this is the environment where a hike actually could lead to lower 10 and 30-year yields... If that's the case the Fed may be comfortable hiking next week, which may have me sympathizing with the consensus after all... Although there's still the mid-term election and federal debt issues I mentioned yesterday for the Fed to contend with."
Suffice to say that a hike is what's needed to bring down longer-term rates has become the consensus view... But only if it's followed by a statement and/or press conference that implies there'll be zero hesitation to hike again should conditions dictate... I.e., the language has to be sufficiently hawkish.
With oil at $100/barrel and producer prices not remotely letting up, fed funds futures are pricing in a 70% chance of a rate hike come next Wednesday.
While the Fed, under previous leadership, is known for not bucking market expectations, if there was ever a time for it to do so, it's now.
I said in last week's video that "the economy could help out the Fed by slowing." Meaning, if the jobs data were to weaken, and if CPI next week were to soften, pressure to raise the fed funds rate would abate markedly, and of course risk markets would love it.
Well, Friday's jobs number -- coming in much better than expected -- indeed did not help, and markets -- albeit not terribly -- sold off accordingly.. Although I suspect the "not terribly" had to do with the fact that under the hood the jobs data really wasn't all that stellar.
Here's from the macro wrap below:
Internal log entry this morning:
9/5/2026:
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Kevin Warsh just completed his highly-anticipated Jackson Hole speech, and, to no surprise, there was no mention of the elephant in the room -- which would be the treasury's financing burden going forward...
I.e., given the enormity of the debt coming due over the next couple of years, as well as the massive current budget deficit, there's no understating the need to issue new treasury debt at rates that simply can't be allowed to rise measurably on the front-end -- despite Warsh's tough-sounding (on inflation) speech this morning.
The great irony here is that, forgive me, inflation is precisely the answer to remedying the debt problem, as it's measured -- a % of GDP.
I.e., there's no paying down the debt, that's a fantasy they're no longer willing to even insult our intelligence with... Ah, but if "we" grow the economy faster than "we" grow the debt -- a la mid-40s to early-50s, we can wake up somewhere in the future with something less than 100+% debt-to-gdp.
